Why George Osborne’s cuts will widen inequality

The countries with the biggest cuts also suffered the largest increases in inequality.

Rarely a week goes by without George Osborne proclaiming that the coalition's cuts are "progressive", but past experience suggests that they will trigger a huge increase in inequality.

The graphic below, from today's Financial Times, shows that the countries with the biggest deficit reductions (Canada, Finland, Netherlands, Sweden) also suffered the largest increases in inequality. Nick Clegg may have promised that there will be no return to "sink-or-swim economics", but since the poor are disproportionately reliant on public services, they will be hit hardest by cuts.

As the second graph shows, while public services represent 62 per cent of disposable income for the poorest fifth, they represent just 8 per cent for the top fifth.

There's also a sober warning from the OECD's Herwig Immervoll, author of a study on the subject, that the comparatively small size of the UK's welfare state means that the rise in inequality is likely to be more severe. "Because there is already less public spending on some areas, there is a risk that it will crumble away more quickly," he says.

Olli Kangas, another expert on inequality, pointed out: "Sweden has a fat welfare state, Finland's is a bit slimmer, and in the UK it is thin.

"If the welfare state is losing weight it will have more impact in the UK than in Sweden and Finland."

The government's decision to opt for an unequal ratio of spending cuts to tax rises (Osborne currently envisages a 77:23 split) also means that the economic pain will be focused on the poor.

The coalition now has a choice. It can either abandon the regressive aspects of its deficit reduction programme, or it can, in true Thatcherite style, argue that the need to cut public spending trumps all social concerns. The current approach, of dressing regressive cuts up as "progressive", is intellectually and morally unsustainable.

Spending

George Eaton is political editor of the New Statesman.

Photo: Getty
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Paul Nuttall is like his party: sad, desperate and finished

The party hope if they can survive until March 2019, they will grow strong off disillusionment with Brexit. They may not make it until then. 

It’s a measure of how far Ukip have fallen that while Theresa May faced a grilling over her social care U-Turn and Jeremy Corbyn was called to account over his past, the opening sections of Andrew Neill’s interview with Paul Nuttall was about the question of whether or not his party has a future.

The blunt truth is that Ukip faces a battering in this election. They will be blown away in the seats they have put up a candidate in and have pre-emptively retreated from numerous contests across the country.

A party whose leader in Wales once said that climate change was “ridiculous” is now the victim of climate change itself. With Britain heading out of the European Union and Theresa May in Downing Street, it’s difficult to work out what the pressing question in public life to which Ukip is the answer.

Their quest for relevance isn’t helped by Paul Nuttall, who at times tonight cast an unwittingly comic figure. Pressing his case for Ukip’s burka ban, he said earnestly: “For [CCTV] to work, you have to see people’s faces.” It was if he had intended to pick up Nigel Farage’s old dogwhistle and instead put a kazoo to his lips.

Remarks that are, written down, offensive, just carried a stench of desperation. Nuttall’s policy prescriptions – a noun, a verb, and the most rancid comment underneath a Mail article – came across as a cry for attention. Small wonder that senior figures in Ukip expect Nuttall to face a move on his position, though they also expect that he will see off any attempt to remove him from his crown.

But despite his poor performance, Ukip might not be dead yet. There was a gleam of strategy amid the froth from Nuttall in the party’s pledge to oppose any continuing payment to Brussels as part of the Brexit deal, something that May and Corbyn have yet to rule out.

If May does manage to make it back to Downing Street on 8 June, the gap between campaign rhetoric – we’ll have the best Brexit, France will pay for it – and government policy – we’ll pay a one-off bill and continuing contributions if need be – will be fertile territory for Ukip, if they can survive as a going concern politically and financially, until March 2019.

On tonight’s performance, they’ll need a better centre-forward than Paul Nuttall if they are to make it that far. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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